AIF Regulations set to be toned down

Nov 30, 2011

30th November, 2011

SEBI has clarified that PEs raising funds from abroad will not be covered under the proposed regulations for Alternative Investment Funds (AIF). A concept paper and draft of the proposed regulations covering AIF were released by SEBI in August, 2011.

The proposal envisaged registration and compliance requirements for AIF defined as ‘pooling or raising of private capital from institutional or High Net Worth Investors with a view to investing it in accordance with a defined investment policy for benefit of those investors and includes private pool of capital such as private equity funds, Venture Capital Fund, PIPE Funds, Infrastructure Debt Fund, Real Estate Funds, Social Venture Fund, Strategic Funds, SME Fund etc’. It also proposed separate investment conditions for various funds.

The draft drew criticism for the proposed regulatory framework which was thought to be restrictive. The draft laid down, among others that a fund would have to invest as per a chosen theme and would have to seek multiple registrations for varied investment objectives.

To remove apprehensions of major PEs, SEBI has now clarified that those raising money from foreign investors will be out of the ambit of the regulations. However, it stressed on the need to provide protection to consumers when funds raised money within India. The rules are expected to take effect within two months time.